House prices set to cool off, says Central Bank boss

Wednesday, June 20, 2018 - 06:30 AM

By Peter Flanagan

Ireland’s house market is set to cool down, Central Bank governor Philip Lane has said, as a renewed surge in prices stokes concerns about another bust. House prices increased 13% in the year to the end of April, the CSO said last week, making here one of the hottest property markets in Europe.

“What we have now is a strong market but we think over time as housing supply increases some of this will cool off,” Mr Lane said at an event in Sintra, Portugal.

“We are putting risk- management parameters in place so if there were any downturn in the future, there are cushions,” he said.

Prices have risen 76% since early 2013. The Central Bank has hinted it could force banks to hold more capital to insulate themselves from any future downturn. Mr Lane emphasised that, for now, price growth reflected the economy.

When asked if he was concerned about house price inflation, he said: “It is important to put it in context. We have an economy that is growing quite quickly, so employment is growing strongly, wages are picking up. So, when we talk about house prices, there are some strong fundamentals there. It’s also the case that we are far below peak prices but, of course, any central bank is going to keep a close eye on the housing market.

“We have put in place credit measures, so there’s a limit to the loan-to-value ratio and loan-to-income ratio for mortgages. We are putting risk-management parameters in place. If there were any downturn in the future ... there’s buffers there in terms of down-payments, in terms of limits on the amount of debt. So what we have now is a strong market but we think over time as housing supply increases, some of this will cool off.”